How the city wasted your money

2011-01-24 00:00

THE Msunduzi Municipality has received a qualified audit for the second year in a row.

The Auditor-General’s (AG) report to the council was tabled at the executive committee (Exco) meeting on Thursday. It laid bare the extent of the mismanagement at the municipality and the AG’s concerns over the leadership and competence of senior staff.

In March 2010, three months before the audit was completed, Msunduzi was placed under administration with a provincial intervention team brought in to sort out the mess

The A-G based his qualified opinion on five areas of poor financial control. These included:

• R19,326 million in irregular expenditure in the 2009/2010 financial year. The report found that this amount was paid in contravention of the supply chain management requirements. The municipality also did not have adequate systems in place to identify and record all irregular expenditure. The amount had increased from the previous audit (2008/9) which had recorded irregular expenditure of R4,078 million.

• The A-G was unable to satisfy himself as to the occurrence, accuracy and completeness of overtime payments of R50,108 million

• No proper asset management of property, plant and equipment owned by the municipality

• Potential investment properties not classified as investment property in the financial statements.

• Investment property of R5,580 million was incorrectly valued in the prior year at R220 million.

Matters of emphasis or concerns expressed by the AG included:

• R290 298 of fruitless and wasteful expenditure due to late payments to suppliers, and an amount of R2,27 million was incurred in respect of an information system that was bought and not used.

• As a result of theft, distribution losses, illegal tampering and ageing infrastructure the municipality suffered losses of R66,484 million for electricity, water losses of R63,066 million and inventory losses of R397,74 million.

• The A-G noted that the municipality had incurred a net loss of R235,92 million during the year end June 2010, and as at that date the municipality’s liabilities exceeded its assets by R125,454 million.

The audit report also found several areas of non-compliance with legal and regulatory requirements, such as not having a functioning audit committee, no performance management system in place, no synchronisation between the budget and the municipality’s integrated development plan (IDP) as well as incomplete information in the IDP.

The A-G was most critical of the then leadership of the municipality.

The report states: “The integrity, philosophy and operating style of the leadership of the municipality has led to the lack of effective control, accountability and oversight within the municipality, which [resulted] ultimately in serious financial challenges for the entity.

As a result timely actions were not taken to address significant deficiencies that were identified by internal and external audit.

“The integrity and ethical values of the employees were not evident and did not set the standard for sound corporate governance. Management’s philosophy and operating style did not promote fair, equitable, transparent, competitive and cost-effective supply chain management processes … that complies with legislation and minimises the likelihood of fraud, corruption, favouritism and unfair and irregular practices.”

The AG said the major reason why Msunduzi Municipality was given a qualified audit was that it did not have competent individuals who understand controls and related processes over the financial reporting framework and performance management requirements. — WR.

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